· MPs to debate motor insurance costs today (Thursday 6th November 2013)

· Transport Select Committee initiates a further consultation on ‘whiplash’

· Direct Lines’ profits rise 73% in the first nine months of 2013

As evidence mounts of car insurers misleading both the public and ministers about a crisis in motor insurance – while actually making very healthy profits – MPs are right to put the spotlight on Government inaction to stop profiteering, says a leading law firm.

Thompsons Solicitors – which has never taken part in the merry-go-round of referrals between the insurance industry, claims companies and some lawyers – welcomes Louise Ellman MP’s letter to Justice Secretary Chris Grayling taking the Government to task.

Thompsons believes the Government is allowing insurers to pay out huge dividends rather than taking action to bring down premiums.

The firm welcomes the Transport Select Committee chairman’s insistence the Government should explain how it will monitor the insurers ‘commitment’ to pass on cost reductions to consumers.

“Insurers shout very loudly about a crisis – and the Government repeats that as fact – but, at the same time, they are making huge profits to which the Government turns a blind eye,” said Tom Jones, head of policy at Thompsons.

The Government’s commitment is as hollow as it is hypocritical. Only last Friday, leading car insurer, Direct Line, announced a big increase in profits and admitted this was largely because of a drop in injury claims.

Cars-4 © The Economic Voice

Car insurers are bombarding MPs about a so-called ‘whiplash pandemic’ and saying ‘the vital next step’ is raising the small claims track limit to £5,000 from its current limit of £1,000 when in fact they are making massive profits, paying out millions in dividends and promising more bounty to come.

It was Admiral delivering the equivalent of £80 per policy holder to their shareholders the other day. And, last Friday, having paid out £164m in dividends in the last 12 months, it was Direct Line’s turn to announce to the London Stock Exchange a 72.7% increase in operating profit in the 9 months of 2013.”

Direct Line’s report referred to ‘Releases from prior year claims reserves [of] £311.1 million’ the ‘bulk’ of which ‘arose in the Motor division where the Group has experienced favourable development on bodily injury claims, which is currently expected to continue’.

Tom Jones added: “In layman’s language, Direct Line is saying ‘having exaggerated the impact of injury claims in previous years we can now release millions from the reserves and it’s going to continue’.

The insurers have simply been using whiplash and the so-called ‘compensation culture’ as cover to over-charge and line the pockets of their shareholders.”

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